J.P. Morgan Private Bank is bullish on four US stock sectors amid the ongoing capital expenditure trend.

Abigail Yoder, an equity strategist at the financial giant, says in a new analysis that the bank is positive on financials, industrials, information technology, and utilities and energy infrastructure.

Yoder notes financials are in a good place to absorb market volatility.

“Large, high-quality banks remain well positioned in the current rate environment, which we describe as ‘higher-for-longer but stable.’ Net interest margins continue to benefit from elevated rates and a steepening yield curve. Resilient credit fundamentals and strong capital positions support earnings durability and downside resilience.”

In terms of industrials, Yoder says defense spending, infrastructure buildout, AI-related capex and reshoring initiatives are all driving structural demand.

“Money is moving into a range of capital-intensive industries, from power equipment and construction to various types of advanced manufacturing. Together, they illustrate the breadth and depth of the industrial cycle.”

The strategist notes that information technology has been the core driver of S&P 500 earnings.

“Recent valuation compression reflects macro volatility and not a deterioration in fundamentals. As we’ve discussed, we see a bright outlook for tech earnings, underscoring the sector’s role as a central pillar of growth and innovation in the U.S. economy.”

Finally, Yoder says utilities and energy infrastructure are increasingly exposed to structural demand.

“Electrification, AI-driven power consumption and grid modernization are shining a spotlight on the economy’s need for long-term energy investment and the sector’s strong earnings prospects.

Forecasters project that electricity demand will exceed current generation capacity over the coming years… A sustained supply-demand imbalance will support companies’ pricing power. We think it will also underpin a multi-year investment cycle across electricity generation, transmission and grid infrastructure.”

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Wells Fargo’s brokerage, investing and financial advisory arm is issuing a warning on the artificial intelligence (AI) and information technology (IT) sector following a significant rally over the past couple of weeks.

In a new investment strategy note, Wells Fargo Advisors says that while the prospects of the AI and IT sector remain “favorable”, the sector has gone up by around 37% since May 29th relative to 17% for the S&P 500 index, making it relatively unattractive for investors. According to Wells Fargo Advisors, there are other sectors that offer better opportunities.

“We suggest the consideration of rebalancing into ancillary sectors with more attractive valuations, such as Financials, Industrials, and Utilities.”

Wells Fargo Advisors says that one of the reasons why the AI and IT sector is currently relatively unattractive includes the massive initial public offerings (IPOs) slated for this year.

“History indicates that large IPO issuance occurs during periods of strong equity market sentiment, but the added equity supply can cause some indigestion. Household equity exposure already sits close to an all-time high, which suggests they may sell existing holdings to fund these new positions. Combined with the ongoing geopolitical tensions and the upcoming midterm elections, it could be one more reason for markets to display greater choppiness in the second half.”

According to Wells Fargo Advisors, the upcoming large IPOs, including SpaceX, OpenAI and Anthropic’s, might impact the rest of the stock market negatively.

“Mega-cap IPOs may force index providers to adjust methodologies, requiring index funds and exchange-traded funds (ETFs) to add new constituents. This can trigger buying pressure and temporarily drive up IPO valuations. It could also drain liquidity from other areas of the market, and increase concentration within major indexes.”

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Fundstrat strategist Mark Newton says declining crude oil prices are helping drive strength in several sectors that have lagged the broader stock market.

In a new interview on the Fundstrat YouTube channel, Newton says the recent improvement in a number of consumer and transportation stocks has coincided with weakness in crude oil, creating opportunities outside of technology.

“A lot of it’s just algorithm based and crude turning down. We’re seeing better strength out of the airlines, which is the biggest beneficiary of a drop in crude [oil].”

The strategist also says several retail stocks that struggled while the broader market pushed to record highs are beginning to stabilize and participate in the rally.

Newton points to companies such as retail giants Nike, Target, Best Buy and Home Depot, noting that they largely failed to keep pace with the market over the last year despite major indices reaching new all-time highs.

“Markets hitting new all-time highs, these stocks just weren’t participating. So now that’s slowly but surely starting to change.”

Newton says the recent strength has emerged over roughly the last week and a half and does not appear to be driven primarily by company-specific fundamentals.

The strategist adds that investors looking to diversify away from technology may want to pay attention to these areas as semiconductor and technology stocks become increasingly extended.

“That’s a very good sign for people looking for alternatives of where [to] put [their] Micron and Seagate [stocks]… technology stocks are getting a bit overbought potentially if you wish to diversify.”

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